The latest employment numbers reveal exactly why small businesses are suing President Trump over his tariff policies: tariffs hit small firms and lower-income consumers the hardest, functioning as a stealth tax that now adds anywhere from 20% to over 50% to the cost of many goods compared with last year.
And the results are now undeniable.
Record Small Business Bankruptcies and a Collapse in Hiring
Small business bankruptcies have surged to record highs, and the newest job numbers show the situation is accelerating.
According to the November 2025 ADP National Employment Report, the private sector saw a net loss of 32,000 jobs. That decline was driven entirely by small businesses, which shed an alarming 120,000 workers in just one month.
ADP’s chief economist, Dr. Nela Richardson, called small firms “a canary in the coal mine” — the first to suffer when consumer demand weakens and operating costs spike. Pay growth for small-firm workers also fell far behind that of larger companies, underscoring how badly the sector is being squeezed.
This isn’t a blip. It’s a structural failure created by policy.
Tariffs Are Functioning as a Massive, Regressive Tax
Unlike large corporations, small businesses don’t have the financial cushion, global supply chains, or pricing power to absorb sudden spikes in import costs. They pay tariffs up front, while their customers — mostly working- and middle-class households — face higher prices at checkout.
That’s why small businesses are paying the equivalent of 20% to over 50% more in real taxes compared with last year. U.S. import prices (excluding the tariff) show that foreign exporters have been raising their prices in dollars. This indicates they are not absorbing much, if any, of the tariff cost.
Tariffs are taxes. And these taxes are crippling the very businesses that drive local economies and job creation.
The Administration Blames… Democrats?
In stark contrast to economic reality, U.S. Secretary of Commerce Howard Lutnick declared that the weak job numbers were not caused by tariffs, but instead blamed:
- the recent government shutdown, and
- mass deportations,
as if those weren’t also direct consequences of Trump’s own policies.
Tariffs raised business costs.
The shutdown weakened demand.
Mass deportations removed workers and consumers.
Every explanation points back to the same place.
The Lawsuit Before the Supreme Court
The reason small businesses are currently suing the administration — in a case now before the U.S. Supreme Court — is precisely because Trump’s tariff actions have caused severe, measurable financial harm.
If the Court rules the tariffs illegal (as multiple lower courts already have), businesses want the right to recover the money they were forced to pay. Without that ruling, many of them won’t survive.
Small businesses are not just numbers on a spreadsheet — they’re the backbone of the U.S. economy. And right now, Trump’s tariff regime is breaking that backbone.